FILE PHOTO: A logo of Turkey’s Central Bank (TCMB) is pictured at the entrance of the bank’s headquarters in Ankara, Turkey April 19, 2015. REUTERS/Umit Bektas//File Photo
December 16, 2021
LONDON (Reuters) – Turkey’s central bank cut its policy rate again as expected by 100 basis points to 14% on Thursday despite inflation soaring above 21%, sending the lira to a fresh record low.
Below is the reaction from analysts to the latest move:
JOHN HARDY, SAXO BANK
“Turkey cuts 100 bps to 14.0% as expected, but still unbelievable”
DENNIS SHEN, SCOPE RATINGS
“The central bank’s tolerance for lira pain certainly appears much higher this go around with (President Tayyip) Erdogan now more or less fully in charge of rates policy.”
“The only thing is that even if destabilising lira devaluation is somehow being fully justified away as being good for correction of the current account and raising exports, now that the lira crisis is starting to have an effect on dampening growth conditions – whether such weakening economic growth might force Erdogan to change course ahead of elections by 2023?
“If so, any ‘change of course’, however, may not mean a rate hike immediately even if the central bank pauses rate cuts at least over the near future, instead potentially meaning capital controls, more FX swaps with domestic banks and friendly allies, and use of reserves to support lira should lira sell-off pressures continue.”
JASON TUVEY, CAPITAL ECONOMICS
“Today’s move provides further evidence, if any were needed, that macro developments are playing little role in the CBRT’s policy formulation.”
“The accompanying statement suggests that the easing cycle will be on pause early next year but, even so, the lira will remain under pressure and capital controls are likely.”
IPEK OZKARDESKAYA, SWISSQUOTE BANK
“The central bank of Turkey made the decision to pull the rates 100 basis points lower despite a heavy objection from the market. It is a bold move that will certainly cost Turkey a lot of money, and headache. The knee jerk reaction is a heavy selloff in the lira. I expect the USD-TRY to end the year within the 17-19 band.”
(Reporting by Ece Toksabay, Marc Jones, Karin Strohecker and Susan Mathew)
Source: One America News Network
